![]() Exhibit 99.2 |
![]() Welcome Ryan Osterholm Director, Finance & Investor Relations |
![]() TM TM Some of the information included in this presentation contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended). Such forward-looking statements are based on management’s beliefs and assumptions and on information currently available. Forward-looking statements include the information concerning SunCoke’s possible or assumed future results of operations, the planned Master Limited Partnership, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and may be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “will,” “should” or the negative of these terms or similar expressions. Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, SunCoke has included in its filings with the Securities and Exchange Commission cautionary language identifying important factors (but not necessarily all the important factors) that could cause actual results to differ materially from those expressed in any forward- looking statement made by SunCoke. For more information concerning these factors, see SunCoke's Securities and Exchange Commission filings. All forward-looking statements included in this presentation are expressly qualified in their entirety by such cautionary statements. SunCoke does not have any intention or obligation to update publicly any forward- looking statement (or its associated cautionary language) whether as a result of new information or future events or after the date of this presentation, except as required by applicable law. This presentation includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in the Appendix at the end of the presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided in the Appendix, or on our website at www.suncoke.com. Safe Harbor Statement Safe Harbor Statement 3 SunCoke Energy 2012 Investor Day |
![]() Fritz Henderson Chairman & Chief Executive Officer |
![]() Establishing the Foundation Establishing the Foundation 5 SunCoke Energy 2012 Investor Day • Executed successful Middletown startup • Improved Indiana Harbor performance • Achieved solid operations across entire coke fleet • Established independent board and governance process • Built corporate headquarter functions from scratch • Executed standalone financial reporting • Achieving financial targets in 2012 • Increased liquidity and generated free cash flow • Pursuit of a planned MLP IPO to enhance valuation and future growth in progress • Continued focus on reducing costs and improving productivity in our coal mining business TM TM Since our July 2011 IPO, we delivered solid progress in many areas, laying a foundation for future growth Proved our cokemaking expertise Established our standalone structure Built financial strength and flexibility for growth Focused on optimizing our coal business |
![]() TM TM Status of Planned MLP IPO Status of Planned MLP IPO • Made significant progress with the SEC registration process • Equity markets – particularly MLP IPO equity markets – have been choppy in recent weeks • Continue to believe the planned MLP will enhance SXC shareholder value • Plan to initiate MLP IPO as soon as market conditions improve 6 SunCoke Energy 2012 Investor Day |
![]() Seizing our Growth Opportunities Seizing our Growth Opportunities 7 SunCoke Energy 2012 Investor Day • Domestic: • Aging existing coke facilities • Higher-priced imports • Opportunities for acquiring existing coke facilities • India: • Growing steel and coke demand • Active merchant market • Clear Priorities and Objectives: • Operational excellence • Increasing U.S./Canada market share • India entry • Strong Organizational Capability: • Experienced management • Operating and technical expertise • Depth of talent • Financial Liquidity: • Strong cash position • Undrawn revolver • Potential to pre-fund obligations for planned MLP • Planned MLP Capital Structure: • Low-cost equity currency • Leverage capacity TM TM Industry Fundamentals Execution Capability & Focus Financial Strength & Flexibility Uniquely positioned to capture a greater share of the global cokemaking market and achieve profitable, sustainable growth |
![]() TM TM Coke Industry Fundamentals Coke Industry Fundamentals 8 SunCoke Energy 2012 Investor Day U.S. & Canada Coke Supply U.S. & Canada Coke Asset Age Profile in 2011 Total 2011 Coke Demand: 19.5 million tons Opportunities exist to potentially replace aging coke batteries and acquire existing facilities Source: CRU, Metallurgical Coke Market Outlook 2012; Company analysis Maintained Facilities with Potential for Acquisition Challenged Facilities with Potential for Replacement Other Merchant Other Merchant & Foundry & Foundry 6% 6% Integrated Integrated Steel Steel Producers Producers 63% 63% SunCoke SunCoke 18% 18% DTE DTE 5% 5% Imports Imports 8% 8% Average Age % of U.S. & Canada coke production 9 37 27% 24% SunCoke U.S. & Canada (excl SXC) 30-40 years 40+ years |
![]() TM TM Coke Industry Fundamentals Coke Industry Fundamentals 9 SunCoke Energy 2012 Investor Day Source: CRU, Metallurgical Coke Market Outlook 2012; Company analysis Evaluation of all existing batteries in US & Canada Customer quality Blast furnace competitiveness Battery condition SXC Market Analysis 6 batteries 4.1 million tons 19 batteries 4.0 million tons Facilities with Potential for Replacement Facilities with Potential for Acquisition We estimate nearly 4 million tons of capacity will be retired/replaced in coming years & another 4 million tons is potentially acquisition worthy |
![]() TM TM Coke Industry Fundamentals Coke Industry Fundamentals 10 SunCoke Energy 2012 Investor Day U.S. & Canada Coke Imports U.S. & Canada Coke Imports Source: Steel Business Briefing; Company estimates Our coke is a preferred solution compared to imported coke which is disadvantaged on quality, reliability and shipping/handling costs Chinese Coke Prices vs. Chinese Coke Prices vs. Representative SunCoke Price Representative SunCoke Price 4.5 4.9 3.3 5.1 0.8 2.0 1.9 2.0 1.8 2005 2006 2007 2008 2009 2010 2011 2012E2013E Imports SunCoke sales volumes $0 $250 $500 $750 (FOB China port - adds $45-$60/ton) Chinese Metallurgical Coke Long-term SunCoke Coke Sales Price (Tons in millions) |
![]() TM TM Coke Industry Fundamentals Coke Industry Fundamentals SunCoke’s coke is competitively priced relative to imported coke Representative Delivered Coke Prices - $/ton Based on September 2012 prices SunCoke Energy 2012 Investor Day 11 SunCoke Price - Contracted Coal Price Differential Chinese Coke Price Ukrainian Coke (1) Ukrainian Coke Price Other Domestic Coke Chinese Coke (2) Chinese 40% Export Tax Premium (Tariff) SunCoke Coke Price @ Spot Coal Price 1 Includes approx. $65/ton freight and approx. $30/ton handling loss for shipping to Great Lakes region 2 Includes approx. $70/ton freight and approx. $35/ton handling loss for shipping to Great Lakes region |
![]() TM TM India Entry: VISA SunCoke India Entry: VISA SunCoke • VISA Steel is a mid-sized, publicly-traded special steel, ferro chrome and coke company – Well-run organization with professional management and quality assets • VISA SunCoke – SXC to hold 49% interest with equal board representation – Will supply VISA Steel’s coke needs (approx. 1/3rd of production) and sell balance into open market – All steam production sold to VISA Steel – VISA SunCoke to be debt-free at closing – Closing expected in Q1 2013, subject to customary conditions 12 SunCoke Energy 2012 Investor Day VISA SunCoke provides a meaningful entry to India and serves as a platform for future growth Chinese Heat Recovery Chinese Heat Recovery Coke: Coke: 400K tpy 400K tpy Steam: Steam: 20 Mwhe 20 Mwhe Built: Built: 2007 2007 Odisha, India Odisha, India Photo courtesy of VISA Steel |
![]() The India Growth Opportunity The India Growth Opportunity 13 SunCoke Energy 2012 Investor Day Sources: CRU, Metallurgical Coke Outlook 2012, World Steel Association, Company estimates India India Brazil Brazil China China 2011 57 123 460 India Metallurgical Coke Demand India Metallurgical Coke Demand Per Capital Steel Demand (kg/yr) Per Capital Steel Demand (kg/yr) India offers attractive coke market fundamentals driven by growing steel demand 28 28 62 62 Electric Power Deficit Growing Steel Market Active Merchant Market Coke Supply Deficit India India Steel/Coke Steel/Coke Market Market |
![]() TM TM The India Growth Opportunity The India Growth Opportunity 14 SunCoke Energy 2012 Investor Day India is a merchant coke market that is power short Estimated EBITDA per ton is typically the same or better in the U.S. Construction capital cost per ton estimated to be one-half less than in U.S. Expect VISA SunCoke will achieve strong returns and serve as platform for growth |
![]() TM TM Our India Strategy Our India Strategy 15 SunCoke Energy 2012 Investor Day • Form VISA SunCoke joint venture • Evaluate & improve existing asset operations • Establish market presence • Grow VISA SunCoke via follow-on opportunities • Reinvest free cash flow • Utilize debt capacity of VISA SunCoke • Develop emerging market plant design • Continue to leverage JV and in-country presence • Pursue “Build- Own-Operate” model with leading integrated steelmakers Near-Term Growth Initial Entry Long-Term Vision |
![]() TM TM Coal Mining Strategy Coal Mining Strategy 16 SunCoke Energy 2012 Investor Day Rationalizing underground mining plan Implementing improved underground mining practices Installing new cyclone and fine circuit in existing prep plant Targeting at least 10% reduction in Jewell underground cash costs in 2013 Increasing utilization of lower cost Revelation and purchased coal in supply Enhancing strategic value and flexibility of business Evaluating option of replacing/ relocating existing prep plant and load out Potential to significantly decrease logistics and operating costs Will enable more coal sourcing flexibility for Jewell Coke Will allocate capital to drive efficiencies, ensure safety and prepare for delinking coal and coke operations Current Actions in Progress to Position for 2013 Strategic Focus Beyond 2013 Taking action intended to reduce costs and enhance our long-term strategic flexibility |
![]() TM TM 2013 Priorities 2013 Priorities SunCoke Energy 2012 Investor Day 17 Sustain momentum at coke facilities Execute Indiana Harbor Execute refurbishment Resolve NOV Renew coke contract with return on refurbishment capital Implement Consent Decree project Execute coal mining action plan to decrease cash cost Maintain top quartile safety performance Domestic Obtain permit for next potential U.S. facility Identify and pursue strategic acquisition opportunities for the planned MLP in the U.S. and Canada Evaluate adjacent business lines to extend growth opportunities International Close VISA SunCoke joint venture Identify potential follow- on opportunities in India Coke MLP Smooth launch, governance and operation of planned MLP entity Coal Reposition mining operations for near-term weakness and long-term strategic flexibility Efficient Capital Allocation Put SXC & planned MLP balance sheets to work Operational Operational Excellence Excellence Grow The Coke Grow The Coke Business Business Strategically Strategically Optimize Assets Optimize Assets |
![]() Mike Thomson President & Chief Operating Officer |
![]() TM TM SunCoke’s Organization Capability SunCoke’s Organization Capability 19 SunCoke Energy 2012 Investor Day SunCoke has the organizational expertise and capability to execute on its 2013 cokemaking strategic priorities Operations Excellence (SunCoke Way) Coal Science & Coke Technology Solid Customer Relationships Lean Engineering Organization Competencies By-Product Preparedness Contract Structuring & Execution |
![]() TM TM 2013 Coke Strategic Priorities 2013 Coke Strategic Priorities 20 SunCoke Energy 2012 Investor Day Execute Indiana Harbor Launch gas sharing project Permit potential new U.S. facility Identify and pursue acquisition opportunities Close VISA SunCoke and optimize plant |
![]() TM TM 2013 Coal Strategic Priorities 2013 Coal Strategic Priorities 21 SunCoke Energy 2012 Investor Day 2013 focus is on optimizing our coal business to enhance long-term strategic flexibility and value Rationalize Mining Plans Enhance Productivity Improve Prep Plant Increase Revelation & Purchased Coal |
![]() TM TM Execute Indiana Harbor Execute Indiana Harbor • World’s first heat-recovery cokemaking facility, started up in 1998 • Supplies ArcelorMittal’s #7 Blast Furnace - largest in Western Hemisphere • Original capital investment of approx. $200 million • Heat recovery assets owned and operated by Cokenergy 22 SunCoke Energy 2012 Investor Day With capacity of 1.22 million tons, Indiana Harbor is our largest North American facility and has significant impact on domestic coke performance |
![]() TM TM Execute Indiana Harbor Execute Indiana Harbor Contract renewal in progress • Currently negotiating long-term contract extension • Lowest cost source of coke for critical customer asset • Estimate $50 million of refurbishment capital with potential for additional spend depending on negotiations • Expect to earn return on incremental capital and maintain current economics 23 SunCoke Energy 2012 Investor Day |
![]() TM TM Execute Indiana Harbor Execute Indiana Harbor Refurbishment underway • Project scoped to enhance reliability, address environmental issues and facilitate long-term contract renewal • Pioneered new plant designs and replacement/repair techniques – Repair of tunnels and sole flues – Installing new oven door & lintels – Encouraging early results - increased charge size ~10% on initial ovens • Potential for additional machinery replacements – Enhanced reliability / lower maintenance expense – Additional capital dependent on outcome of renewal negotiations 24 SunCoke Energy 2012 Investor Day Before After |
![]() TM TM Launch Gas Sharing Project • Expect to finalize Consent Decree with U.S. EPA for Haverhill/Granite City NOVs soon • Core of solution is implementation of Gas Sharing at both facilities – Involves retrofitting each facility with redundant HRSG, ductwork and advanced controls to substantially reduce HRSG venting • Estimated cost of approximately $100 million for both plants • Procurement and final engineering underway with implementation planned for 2013 to 2016 25 SunCoke Energy 2012 Investor Day We have identified, engineered and are ready to implement a Gas Sharing project at Haverhill and Granite City |
![]() TM TM Launch Gas Sharing Project • Gas Sharing encompasses enhanced equipment and design, plus more advanced control systems and operating practices – Leveraged internal expertise and process engineering capability to develop • Concept forms the basis for next generation coke plants in the U.S. • Will meet or exceed new EPA regulations • Sets new Best Available Control Technology Gas Sharing technology will establish a new environmental benchmark for cokemaking, keeping SunCoke at the forefront 26 SunCoke Energy 2012 Investor Day |
![]() TM TM Permit Potential New U.S. Facility • Design, engineering and permitting underway – Permit submitted December 2012 12-18 months process from submission – Will seek customer commitments once permit in hand • Lean engineering focus for new plant design – Must meet tougher new U.S. EPA requirements – Be capital efficient – Enhance operating efficiencies and flexibility – Logistics – both inbound coal and outbound coke are considerations 27 SunCoke Energy 2012 Investor Day Potential Kentucky Site |
![]() TM TM *Inflation adjusted to 2011 dollars and, for Haverhill II and Granite City, adjusted to include estimated cost for power generation facility Permit Potential New U.S. Facility • Major value improvements – 30% smaller footprint – Fewer but larger HRSGs – Significant boiler feed water and steam piping savings – Modular design allows for modular future expansion • Design enhancements – Higher energy production – Reduced power consumption – Improved yield from better coke/coal handling and oven design & control 28 SunCoke Energy 2012 Investor Day 442 505 564 725 Haverhill 1 Haverhill 2 Granite City Middletown Next US Plant Normalized* Construction Cost per Ton of Capacity 500E – 600E Lean engineering efforts expected to reduce cost of potential new U.S. facility despite increasing environmental controls |
![]() TM TM Advantages of HR Advantages of BP Negative Pressure Ovens Positive Pressure Ovens Cogeneration potential • Potential high value for by-products • Makes coke oven gas for steelmaking No wall pressure limitations on coal blend No volatile matter limitations on coal blend New designs a potential fit for by-product oven and chemical plant Smaller oven footprint for new and replacement ovens Higher CSR coke quality High comfort level with >100 years of operating experience Lower capital cost and simpler operation Natural gas pricing hedge Identify and Pursue Acquisitions 29 SunCoke Energy 2012 Investor Day • No air leaks into oven • Higher yield • Minimal fugitive emissions • Leading environmental technology • Steam or electricity as desired • More fungible by-product (power) While heat recovery technology offers many advantages, by-product technology can also provide certain benefits in cokemaking |
![]() TM TM Identify and Pursue Acquisitions Identify and Pursue Acquisitions 30 SunCoke Energy 2012 Investor Day Low Cost of Capital • Potential for planned MLP to provide lower cost capital for acquisitions • Frees up capital on customer balance sheets for strategic investments Operating Know-How & Reliable Supply • Strong cokemaking expertise • Capability to operate by-product facilities Solid Customer Relationships • Proven track record with customers We can provide a compelling value proposition to customers in pursuing acquisition opportunities in the U.S. and Canada |
![]() TM TM Close VISA SunCoke and Optimize Plant Close VISA SunCoke and Optimize Plant Quality Assets • Built in 2007; SPCDI-China design • 8 Batteries; 88 Ovens; Charge per oven – 54mt; Coking time – 68 hours • Stamp charging technology • Well maintained plant • Staff are knowledgeable and credible cokemakers Plan to Support & Optimize • Will appoint JV’s CFO and deputy operations manager • Will actively support with U.S.- based operating and technical staff • Partnering to enhance operations and position for growth • Launchpad for future India and emerging market opportunities 31 SunCoke Energy 2012 Investor Day Photo courtesy of VISA Steel |
![]() TM TM Summary Summary 32 SunCoke Energy 2012 Investor Day Organizational Capability Clear 2013 Priorities Operations Excellence (SunCoke Way) Coal Science & Coke Technology Solid Customer Relationships Organization Competencies Lean Engineering By-Product Preparedness Contract Structuring & Execution Execute Indiana Harbor Launch gas sharing project Permit potential new U.S. facility Identify and pursue acquisition opportunities Close VISA SunCoke and optimize plant |
![]() Mike Hardesty Senior Vice President, Sales & Commercial Operations |
![]() TM TM State of the U.S. Coal Market State of the U.S. Coal Market • Slowing China growth impacting marginal demand, while European and South American demand remains tepid • Domestic steel output slightly above 70% of capacity, further depressing coking coal prices • Weak natural gas prices keeping lid on domestic thermal coal activity • Improved output from Australia pressured global prices as demand fell • Global inventory glut is the result • Significant U.S. cuts announced in response to weak market conditions; Australia appears to be making initial cuts now • Strict U.S. regulatory environment limits cost improvement measures • International benchmark pricing down by $55/ton year-over-year to $170/ton for fiscal Q3 • U.S. met coal prices have decoupled and held up better than global prices • Current FOB mine domestic prices near cash cost for many CAPP sources of premium met coals Demand Supply Price 34 SunCoke Energy 2012 Investor Day |
![]() TM TM Coal Mining Financial Summary Coal Mining Financial Summary • Since 2010 cash costs and reject rates have increased • Deterioration in performance reflects: – Geological challenges – Impact of aging mining equipment and prep plant – Labor training and productivity challenges • Given environment, our mining segment is focused on cost reduction 35 SunCoke Energy 2012 Investor Day Coal Mining Adjusted EBITDA (1) and Avg. Sales Price/Ton (2) ($ in millions, except per ton amounts) (1) For a definition and a reconciliation of Adjusted EBITDA, please see the appendix. (2) Average Sales Price is the weighted average sales price for all coal sales volumes, including sales to affiliates and sales to Jewell Coke. 64% 65% 67% $130 $157 $168 $19 $24 $24 $106 $132 $143 55% 65% 75% 85% 95% 105% FY2010 FY2011 YTD Sept 2012 JCM Reject Rate Average Sales Price Coal Adj EBITDA / ton Coal Cash Cost / ton |
![]() TM TM Coal Mining Action Plan Coal Mining Action Plan • Targeting underground cash cost reduction of at least 10% – Realize value of recent equipment investments – Improved maintenance programs – Optimize mine plans Footprint reduction (seals) Target best areas (optimization) Negotiate lower royalty rates • Expect improved yield from plant – New circuit upgrade – Higher % of surface production • Maintain and improve top-quartile safety performance 36 SunCoke Energy 2012 Investor Day 2013 Coal Mining objectives focus on cost reduction and mitigating impact of lower pricing Rationalize Mining Plans Enhance Productivity Increase Revelation & Purchased Coal Improve Prep Plant |
![]() TM TM • Anticipate at least a 2% yield improvement from new cyclone & fine circuit upgrade • Additional spending to maintain plant structure • Minor amount of capital for permitting and planning for long-term strategic options • Opportunistically buy lower-cost coal to supplement production • Increase percentage of lower-cost surface production via Revelation • Minimize thermal production to extent possible • Face equipment upgrade program completion expected in Q1 13 • Improved operating practices • Implement new asset management software • New maintenance program being deployed • Idling 2-3 company and 3 contract mines • Consolidating people and equipment • Implementing deep cut plans as approved Rationalize Mining Plans Enhance Productivity Improve Prep Plant Increase Revelation & Purchased Coal Coal Mining Action Plan Coal Mining Action Plan 37 SunCoke Energy 2012 Investor Day |
![]() TM TM 2013 Estimates 2013 Estimates MV MV Thermal Thermal Total Total Sales Tons Tons in thousands 1,600 100 1,700 % Committed ~94% 0% ~88% Estimated Price of Committed Tons (1) $127 N/A $127 Estimated Price Range of Uncommitted Tons High $140 $80 Low $120 $60 Estimated Production Costs Jewell Underground Cash Cost/ton (~950k tons) ~$145 Combined Cash Cost/ton (~1.7m tons) ~$130 (1) Estimated as price to Jewell Coke not yet finalized . 2013 Coal Business Metrics 2013 Coal Business Metrics 38 SunCoke Energy 2012 Investor Day Weak demand and excess global inventory are driving lower expected prices in 2013 SunCoke Mid-Vol Coal Contract Prices $130 $165 $120 - $130 2010 2011 2012E 2013E ~$170 |
![]() TM TM Coal Business Wrap-Up Coal Business Wrap-Up • Expect difficult environment to continue through most of 2013 – Potential for price turnaround in late 2013 into 2014 • Experienced coal team has navigated through previous volatile markets successfully • Allocate minimum sustaining capital to drive down cost and ensure safety/compliance 39 SunCoke Energy 2012 Investor Day $200 $250 $300 $350 2007 2008 2009 2010 2011 2012 Met Coal Pricing (Mid-Vol) FOB Vessel ($/Metric Ton) FOB Jewell ($/Net Ton) $- $50 $100 $150 2013 focus is on optimizing our coal business to enhance long-term strategic flexibility and value |
![]() Dr. John Quanci Vice President, Technology |
![]() TM TM Industry Pioneer Industry Pioneer History at the industry forefront • Half a century of innovation & industry-leading design • Founder of Heat Recovery (HR) oven technology • Developed the first HR Plant (1998) – Lower environmental footprint – Higher quality coke (size, strength, reactivity) – Generates energy (customers & local power grids) • SunCoke is the only coke producer… – in North America to leverage Heat Recovery technology – to construct greenfield plants in the U.S. in the last 25 years – to develop, implement AND operate HR ovens 41 SunCoke Energy 2012 Investor Day |
![]() SunCoke’s Technology Group SunCoke’s Technology Group • Multi-disciplinary team with deep expertise • 13 engineers & scientists on staff (6 PhDs) • 4 Computational Modeling Experts, 3 Process Engineers and 5 Technology Specialists • Expansive test bed – 1,000+ SunCoke ovens 42 SunCoke Energy 2012 Investor Day • Computational Fluid Dynamics (CFD) • Finite Element Analysis (FEA) • Integrated plant model • Modeling tools • Plant optimization • New process and technology development • Pilot plant program • Troubleshooting • Yield improvement • Coke/coal chemistry modeling • Oven design and ceramics • New coke plant design • Coal blend optimization • Kinetic modeling TM TM Computational Modeling Process Technology Technology Specialists Team composition speeds problem solving & innovation |
![]() TM TM SunCoke’s Technology Group SunCoke’s Technology Group Unique Approach to R&D • Process engineering driven vs. traditional R&D • Parallel approach: long-term & here-and-now – Get to solutions faster (product & processes) – Run plants better through troubleshooting existing assets – Explore new frontiers and next generation innovations • Extend know-how beyond SunCoke’s fleet – Directly transferable to by-product ovens and any HR design • R&D drives operating results – Yield improvements bolster our margins – Operations & maintenance efficiencies – Cut costs out of future designs 43 SunCoke Energy 2012 Investor Day |
![]() TM TM Recent Advancements Recent Advancements Indiana Harbor – Oven Rehabilitation • Problem: • Solution: • Results: 44 SunCoke Energy 2012 Investor Day – Ease of pushing and minimization of leaks – Repairs show on average a 10% increase in tons per day – 11 ovens rehabbed – upgrades ongoing – Transfer of methods across fleet, creating new engineering standards – Leaks & maintenance issues limit productivity – Tighter seal via door improvements, lintel design changes and new maintenance methods |
![]() TM TM Recent Advancements Recent Advancements Gas Sharing • Problem: – If a HRSG goes off-line, untreated hot flue gas must be vented. • Proposed Solution: – Leveraged our CFD, FEA and process expertise combined with plant tests to identify and verify various solutions. • Results: – Control and manage gas flow – A reliable, lower cost, retrofitable solution – Less heat loss and venting – Next generation extension to near-zero venting 45 SunCoke Energy 2012 Investor Day Heat Recovery Steam Generator (HRSG) Model Spray Dryer Absorber (SDA) Model |
![]() TM TM Recent Advancements Recent Advancements Coal Blend Optimization • Problem: – Selecting least expensive blends from available coals that meet operational and quality constraints • Solution: – Coal blend/coke prediction model for worldwide applications • Results: – Minimize coal blend cost – Quantitatively evaluate individual coals – Predict and improve coke quality, stability, yield and power 46 SunCoke Energy 2012 Investor Day |
![]() TM TM Coal Blend Modeling Coal Blend Modeling 47 SunCoke Energy 2012 Investor Day Planned test Space Coal 3 Coal 2 Coal 1 reflectance optimal coking range Exploring the Coal Blend Space |
![]() TM TM Recent Advancements Recent Advancements • Box Testing – New coal testing and plant optimization – Allows safe, low cost testing of sophisticated models – Ability to test blue-sky concepts not feasible full-scale – Extends model range -- not limited to normal coke plant operations – SunCoke’s boxes are recyclable and reusable 48 SunCoke Energy 2012 Investor Day Outside-of-the-box thinking inside the box Box loaded with coal In position Recovered after coking |
![]() TM TM Potential Improvements at Existing Plants Potential Improvements at Existing Plants 49 SunCoke Energy 2012 Investor Day Believe our technology and know-how can be applied to existing heat recovery and by-product plants Process Improvement • Lower burn loss • Yield improvement • Higher power production • Expanded coal VM operating regime - Lower coke cost • Improved coke quality Asset Support • Lower cost coal/coke by blend optimization • Increased production • Higher turndown • Improved monitoring and prediction tools - yield/energy • Best practices development for asset care and life extension Environmental Performance • Improved FGD environmental efficiency • Improved FGD reliability • Lower operating costs • Improved monitoring and prediction tools |
![]() TM TM Wrap-Up Wrap-Up Fueling Innovation • Unique Approach to R&D – Direct link to existing facilities – Get to solutions faster – Use capital more efficiently • Technology Group’s charter extends beyond solely cokemaking – Seek to understand customers, suppliers, community and competing technologies • 14 patent applications submitted or in process of being submitted in 2012 alone • Continuing to bring science to the art of cokemaking 50 SunCoke Energy 2012 Investor Day |
![]() Mark Newman Senior Vice President & Chief Financial Officer |
![]() TM TM YTD Earnings Overview YTD Earnings Overview • Results driven by strong coke business performance – Middletown startup has been a success – Entire U.S. cokemaking fleet delivering strong results • Coal remains a challenge – Higher than expected cash costs – Continued difficult demand/price environment – Implementing aggressive coal action plan • Strong liquidity position – Cash balance of nearly $160 million and virtually undrawn revolver of $150 million as of Q3 2012 52 SunCoke Energy 2012 Investor Day Earnings Per Share (diluted) Adjusted EBITDA (1) (in millions) $0.17 $0.24 $0.32 $0.32 $0.26 $0.45 2011 2012 Q1 Q2 Q3 $26.6 $55.8 $37.7 $65.5 $44.8 $72.4 2011 2012 Q1 Q2 Q3 |
![]() TM TM Expected 2012 Adjusted EBITDA Expected 2012 Adjusted EBITDA (1) (1) 53 SunCoke Energy 2012 Investor Day Expect to achieve 2012 Adjusted EBITDA (1) of $255 - $270 million and end year with cash balance of approximately $240 million ($ in millions) $140.5 $109.1 $193.7 $42.3 $37.0 $10.9 ($5.6) $61- $76 $255- $270 FY 2011 Adjusted EBITDA YTD Q3 2011 Adjusted EBITDA Middletown Coke Business (Excl. Middletown) Coal Business Corporate Costs YTD Q3 2012 Adjusted EBITDA Q4 2012E Adjusted EBITDA FY 2012E Adjusted EBITDA (1) For a definition and reconciliation of Adjusted EBITDA, please see the appendix. |
![]() TM TM Expected 2012 Earning Per Share Expected 2012 Earning Per Share 54 SunCoke Energy 2012 Investor Day (1) For a definition and reconciliation of Adjusted EBITDA, please see the appendix. EPS has benefited from strong coke business performance offset by financing costs for standalone capital structure FY 2011 EPS YTD Q3 2011 EPS YTD Q3 2012 Adjusted EBITDA(1) YTD Q3 2012 Depreciation, Depletion & Amortization YTD Q3 2012 Financing Costs YTD Q3 2012 Taxes YTD Q3 2012 EPS Q4 2012E EPS FY 2012E EPS $0.87 $0.75 $1.01 $1.25- $1.35 $1.20 $0.24- $0.34 ($0.21) ($0.59) ($0.14) |
![]() TM TM 2013 Domestic Coke Business Outlook 2013 Domestic Coke Business Outlook • Ongoing focus on operations excellence expected to continue to drive performance • Overall capacity utilization anticipated to exceed 100% in 2013 • Indiana Harbor expected to return to 1.22 million ton per year run-rate in 2013 as a result of our refurbishment effort 55 SunCoke Energy 2012 Investor Day Tons in thousands Intend to sustain solid cokemaking performance with expected domestic coke production in excess of 4.3 million tons in 2013 Domestic Domestic Coke Coke Production Production 1,179 1,179 1,141 1,141 715 715 707 707 1,124 1,124 1,103 1,103 635 635 684 684 68 68 FY2010 FY2011 FY2012E FY2013E Jewell Indiana Harbor Haverhill Granite City Middletown 3,762 3,594 4.3m+ 4.3m+ |
![]() TM TM 2013 Domestic Coke Business Outlook 2013 Domestic Coke Business Outlook Outlook reflects • • • 56 SunCoke Energy 2012 Investor Day (1) For a definition of Adjusted EBITDA and Adjusted EBITDA/Ton and reconciliations, see appendix. (2) Includes Indiana Harbor contract billing adjustment of $6.0 million, net of noncontrolling interest (NCI), and inventory adjustment of $6.2 million, net of NCI, of which $3.1 million is attributable to Q3 2011. ($ in millions, except per ton amounts) Expect Domestic Coke Business to continue to generate Adjusted EBITDA per ton of between $55 and $60 in 2013 Domestic Coke Adjusted Domestic Coke Adjusted EBITDA EBITDA (1) (1) Per Ton Per Ton /ton (2) /ton /ton /ton $55 - $60 ~$55 $ 36 $ 56 $202 $136 ~$240 $240 - $255 $79 $79 $124 $124 $46 $46 $89 $89 Jewell Coke Segment Other Domestic Coke Segement Adjusted EBITDA/ton Higher operating cost recovery at Middletown Continued improvement at Indiana Harbor Lower benefit of improved yields due to pass-through of lower coal prices FY2010 FY2011 FY2012E FY2013E |
![]() 2013 Coal Mining Adjusted EBITDA 2013 Coal Mining Adjusted EBITDA (1) (1) Outlook Outlook 57 ($ in millions) SunCoke Energy 2012 Investor Day Expected production increase at Revelation and improved operating efficiencies will help mitigate very difficult price environment in 2013 (1) For a definition and reconciliation of Adjusted EBITDA, please see the appendix. |
![]() TM TM Expected 2013 Adjusted EBITDA Expected 2013 Adjusted EBITDA (1) (1) 58 SunCoke Energy 2012 Investor Day (1) For a definition and reconciliation of Adjusted EBITDA, please see the appendix. Primarily reflects expected benefit of VISA SunCoke Expect 2013 results to be impacted by weak coal business, partly offset by continued solid coke operations and VISA SunCoke |
![]() Expected 2013 Earnings Per Share Expected 2013 Earnings Per Share 59 SunCoke Energy 2012 Investor Day (1) Coal business weakness plus accelerated depreciation at Indiana Harbor due to refurbishment expected to negatively impact 2013 EPS For a definition and reconciliation of Adjusted EBITDA, please see the appendix. |
![]() TM TM Capital Expenditures & Investments Capital Expenditures & Investments 60 SunCoke Energy 2012 Investor Day Middletown: $171 million HKCC Acquisition: $41 million Indiana Harbor Refurbishment & Gas Sharing: ~$75 million $ in millions VISA SunCoke: ~$67 million 33 24 2011 2012E 2013E Coke Coal Investments $280 $70 $200 41 206 24 46 67 109 Majority of 2013 capital expenditures and investments targeted toward international coke growth and Indiana Harbor refurbishment |
![]() TM TM Capital Allocation Priorities Capital Allocation Priorities 61 SunCoke Energy 2012 Investor Day • Indiana Harbor refurbishment for contract renewal • Potential acquisitions of existing cokemaking capacity • Potential new U.S. plant Domestic Coke Growth • Fund future India growth via VISA SunCoke • Debt-free at closing • Expect to generate free cash flow International • Target investment in coal business to lower cost and optimize long-term strategic flexibility Optimize Coal • Dividend/Share repurchase policy is purview of board – no plan to initiate a dividend at this time • Board will evaluate based on outlook for growth opportunities and expected returns Cash Return to Shareholders |
![]() TM TM Summary 2013 Guidance Summary 2013 Guidance 62 Metric Expected 2012 Outlook Expected 2013 Outlook Adjusted EBITDA (1) $255 – $270 million $205 – $230 million EPS (assuming a 22% tax rate) $1.25 – $1.35 $0.60 – $0.85 Capital Expenditures & Investments ~ $70 million ~ $200 million Free Cash Flow (2) $100+ million ~ ($65) million Cash Tax Rate 10% – 15% 17% – 22% Effective Tax Rate 20% – 24% 17% – 22% Coke Production 4.3+ million tons 4.3+ million tons Coal Production ~ 1.4 million tons ~ 1.4 million tons (1) For a definition and reconciliation of Adjusted EBITDA, please see the appendix. (2) For a definition of Free Cash Flow and reconciliation, please see the appendix. SunCoke Energy 2012 Investor Day |
![]() TM TM APPENDIX APPENDIX 63 |
![]() TM TM Definitions Definitions 64 SunCoke Energy 2012 Investor Day • Adjusted EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) adjusted for sales discounts, the deduction of income attributable to noncontrolling interests in our Indiana Harbor cokemaking operations, and the interest, taxes, depreciation, depletion and amortization attributable to equity earnings in our unconsolidated affiliates. EBITDA reflects sales discounts included as a reduction in sales and other operating revenue. The sales discounts represent the sharing with customers of a portion of nonconventional fuel tax credits, which reduce our income tax expense. However, we believe our Adjusted EBITDA would be inappropriately penalized if these discounts were treated as a reduction of EBITDA since they represent sharing of a tax benefit that is not included in EBITDA. Accordingly, in computing Adjusted EBITDA, we have added back these sales discounts. Our Adjusted EBITDA also reflects the deduction of income attributable to noncontrolling interests in our Indiana Harbor cokemaking operations. Our Adjusted EBITDA also includes EBITDA attributable to our unconsolidated affiliates. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or operating income under GAAP and may not be comparable to other similarly titled measures in other businesses. Adjusted EBITDA does not represent and should not be considered as an alternative to net income as determined by GAAP, and calculations thereof may not be comparable to those reported by other companies. We believe Adjusted EBITDA is an important measure of operating performance and provides useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures and because it eliminates items that have less bearing on our operating performance. Adjusted EBITDA is a measure of operating performance that is not defined by GAAP and should not be considered a substitute for net (loss) income as determined in accordance with GAAP. • Adjusted EBITDA/Ton represents Adjusted EBITDA divided by tons sold. • Free Cash Flow equals cash from operations less cash used in investing activities less cash distributions to non-controlling interests. Management believes Free Cash Flow information enhances an investor’s understanding of a business’ ability to generate cash. Free Cash Flow does not represent and should not be considered an alternative to net income or cash flows from operating activities as determined under GAAP and may not be comparable to other similarly titled measures of other businesses. |
![]() TM TM Reconciliations Reconciliations 65 SunCoke Energy 2012 Investor Day $ in millions YTD Sept 2012 Q3 2012 Q2 2012 Q1 2012 FY 2011 Q4 2011 Q3 2011 Q2 2011 Q1 2011 Adjusted Operating Income 138.5 54.8 46.6 37.1 80.4 14.9 33.5 24.6 7.4 Net Income (Loss) attributable to Noncontrolling Interest 2.3 1.3 1.3 (0.3) (1.7) (0.5) 3.4 1.6 (6.2) Subtract: Depreciation Expense (57.5) (18.9) (20.2) (18.4) (58.4) (16.0) (14.7) (14.7) (13.0) Adjusted EBITDA 193.7 72.4 65.5 55.8 140.5 31.4 44.8 37.7 26.6 Subtract: Depreciation, depletion and amortization (57.5) (18.9) (20.2) (18.4) (58.4) (16.0) (14.7) (14.7) (13.0) Subtract: Financing expense, net (36.0) (12.2) (11.8) (12.0) (1.4) (7.1) (3.3) 4.5 4.5 Subtract: Income Tax (19.9) (7.6) (7.0) (5.3) (7.2) 2.9 (5.1) (1.9) (3.1) Subtract: Sales Discount (9.1) (2.1) (3.8) (3.2) (12.9) (3.2) (3.5) (3.1) (3.1) Add: Net Income attributable to NCI 2.3 1.3 1.3 (0.3) (1.7) (0.5) 3.4 1.6 (6.2) Net Income 73.5 32.9 24.0 16.6 58.9 7.5 21.6 24.1 5.7 Reconciliations from Adjusted Operating Income and Adjusted EBITDA to Net Income |
![]() TM TM Reconciliations Reconciliations 66 SunCoke Energy 2012 Investor Day $ in millions, except per ton data Jewell Coke Other Domestic Coke International Coke Jewell Coal Corporate Combined Domestic Coke YTD Sept 2012 Adjusted EBITDA 41.1 143.6 1.7 27.4 (20.1) 193.7 184.7 Subtract: Depreciation, depletion and amortization (4.0) (39.0) (0.2) (12.6) (1.7) (57.5) (43.0) to noncontrolling interests - 2.3 - - - 2.3 2.3 Adjusted Pre-Tax Operating Income 37.1 106.9 1.5 14.8 (21.8) 138.5 144.0 Adjusted EBITDA 41.1 143.6 1.7 27.4 (20.1) 193.7 184.7 Sales Volume (thousands of tons) 539 2,729 970 1,130 - - 3,268 Adjusted EBITDA per Ton 76.3 52.6 1.8 24.2 56.5 FY 2011 Adjusted EBITDA 46.1 89.4 13.7 35.5 (44.2) 140.5 135.5 Subtract: Depreciation, depletion and amortization (4.9) (38.7) (0.2) (12.9) (1.7) (58.4) (43.6) to noncontrolling interests (1.7) (1.7) (1.7) Adjusted Pre-Tax Operating Income 41.2 49.0 13.5 22.6 (45.9) 80.4 90.2 Adjusted EBITDA 46.1 89.4 13.7 35.5 (44.2) 140.5 135.5 Sales Volume (thousands of tons) 702 3,068 1,442 1,454 3,770 Adjusted EBITDA per Ton 65.7 29.1 9.5 24.4 35.9 FY 2010 Adjusted EBITDA 123.9 78.5 15.0 24.0 (14.1) 227.3 202.4 ArcelorMittal settlement (69.0) 18.0 (51.0) (51.0) related to ArcelorMittal Settlement and 3.6 12.7 16.3 16.3 Proforma Adjusted EBITDA 58.5 109.2 15.0 24.0 (14.1) 192.6 167.7 Subtract: Depreciation, depletion and amortization (4.4) (35.0) (0.1) (7.7) (1.0) (48.2) (39.4) to noncontrolling interests 7.1 7.1 7.1 Adjusted Pro Forma Operating Income 54.1 81.3 14.9 16.3 (15.1) 151.5 135.4 Adjusted EBITDA 58.5 109.2 15.0 24.0 (14.1) 192.6 167.7 Sales Volume (thousands of tons) 721 2,917 - 1,277 3,638 Adjusted EBITDA per Ton 81.1 37.4 18.8 46.1 Reconciliations from Adjusted EBITDA to Adjusted Pre-Tax Operating Income |
![]() ![]() ![]() TM TM (in millions) 2012E Low 2012E High For nine months ended 9/30/2012 Net Income $94 $104 $74 Depreciation, Depletion and Amortization 80 78 58 Total financing costs, net 48 47 36 Income tax expense 25 34 20 EBITDA $247 $263 $187 Sales discounts 11 12 9 Noncontrolling interests (3) (5) 2 Adjustment to unconsolidated affiliate earnings – – – Adjusted EBITDA $255 $270 $194 2012E Net Income to Adjusted EBITDA Reconciliation Expected 2012E EBITDA Reconciliation Expected 2012E EBITDA Reconciliation 67 SunCoke Energy 2012 Investor Day |
![]() TM TM Expected 2012E Free Cash Flow Reconciliation Expected 2012E Free Cash Flow Reconciliation 68 SunCoke Energy 2012 Investor Day (in millions) Estimated 2012 For nine months ended 9/30/2012 (Actual) Cash from operations In excess of $ 173 $ 78 Less cash used for investing activities Approx. (70) (41) Less payments to minority interest Approx. (3) (0) Free Cash Flow In excess of $ 100 $ 37 2012E Estimated Free Cash Flow Reconciliation |
![]() ![]() TM TM (in millions) 2013E Low 2013E High Net Income $46 $63 Depreciation, Depletion and Amortization 99 94 Total financing costs, net 48 47 Income tax expense 10 18 EBITDA $202 $222 Sales discounts 6 7 Noncontrolling interests (3) (4) Adjustment to unconsolidated affiliate earnings – 5 Adjusted EBITDA $205 $230 2013E Net Income to Adjusted EBITDA Reconciliation Expected 2013E EBITDA Reconciliation Expected 2013E EBITDA Reconciliation 69 SunCoke Energy 2012 Investor Day |
![]() TM TM Expected 2013E Free Cash Flow Reconciliation Expected 2013E Free Cash Flow Reconciliation 70 SunCoke Energy 2012 Investor Day (in millions) Estimated 2013 Cash from operations Approx. 140 Less cash used for investing activities Approx. (200) Less payments to minority interest Approx. (5) Free Cash Flow Approx. $ (65) 2013E Estimated Free Cash Flow Reconciliation |
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